FRANCE AUCTION RESULTS: LT OAT Results

The Italian unemployment rate fell to 5.9% in April, below the 6.1% consensus and prior. The fall was due to a small decline in labour force participation, with total employment unchanged for the third consecutive month. That leaves 3m/3m employment growth at 0.4% (vs 0.6% prior). 

• The positive employment growth is consistent with the EC’s expected employment indicator, which remains above the neutral 100 level (104.2 vs 103.8 prior).
• While a solid labour market should continue to support real domestic consumption going forward, the main risk to Italy’s export-sensitive economy for the rest of 2025 stems from US tariff developments.

With a clamour of recent sell-side calls for broader USD losses, some note bullish factors that could provide a reprieve for the dollar in the short-term:

• We wrote yesterday that derivatives markets often move with a higher beta to spot - so it's a surprise to see a synthetic USD Index risk reversal proving more resilient to the recent sell-off relative to today's price - which could be containing the next leg lower for the dollar.
• Deutsche Bank's latest World Outlook sees markets on a turbulent, but sustained, path toward de-escalation of tariff headlines, and while there's likely to be prolonged uncertainty and a notable slowdown in US growth over H2, the de-escalation will support growth earlier relative to prior expectations.
• MUFG write that the Fed need to see clearer evidence that the US labour market is loosening in order to have more confidence to resume rate cuts, and should NFP meet expectations of +130k on Friday, this may not be weak enough to significantly bring forward expectations for rate cuts from September.
• ING see trade developments as remaining crucial, and while China is gaining leverage over the US through control of chip supply, Trump and Xi are to speak this week, leaving room for a positive surprise that could help the dollar at some point this week.

Austrian HICP flash inflation eased by 0.3pp to 3.0% Y/Y in May along with -0.1% M/M. 

• CPI headline inflation also dipped -0.1% M/M although saw a steadier moderation of 0.1pp to the same 3.0% Y/Y.
• CPI details:
  • "Services remain the main driver of inflation with prices rising by 4.4% Y/Y - still strong, though slightly less than in recent months [4.8% April]. Prices for industrial goods saw only a slight increase of 0.8% [0.9% April]", the statistics office adds.
  • "Food, tobacco and alcohol also saw an above-average price increase of 3.3% [3.2% Apr]. In contrast, energy prices rose by just 1.3% [0.7% Apr], below the overall inflation rate. This was largely due to significantly lower fuel prices compared to the previous year, which offset the impact of higher electricity costs."
• For reference, Austria represents 3.4% of the overall 2025 Eurozone HICP basket.